COMMERCIAL LAW

►Powers of Corporations1. Power to extend or shorten corporate name2. Power to increase or decrease capital stock;3. Power to create or increase bonded indebtedness4. Power to deny pre-emptive right5. Power to invest corporate funds in another corporation or business for any other purpose6. Power to declare dividends7. Ultra vires acts of corporations

►Consideration for stocks1. Actual cash paid to the corporation2. Property, tangible or intangible, actually received by the corporation and necessary or

convenient for its use and lawful purposes at a fair valuation equal to the par or issued value of the stock issued;

3. Labor performed for or services actually rendered by the corporation4. Previously incurred indebtedness of the corporation5. Amounts transferred from unrestricted retained earnings to stated capital; and6. Outstanding shares exchanged for stocks in the event of reclassification or conversion

TRUST RECEIPT

►What is a trust receipt transaction?_►A security transaction intended to aid in financing importers and retail dealers who do not

have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased.

►What are the obligations of the entrustee in a Trust Receipt transaction?

1. To hold the goods, documents or instruments in trust for the entruster and shall dispose of them strictly in accordance with the terms and conditions of the trust receipt;

2. To receive the proceeds in trust for the entruster and turn-over the same to the entruster to the extent of the amount owed to the entruster or as appears on the trust receipt;

3. To insure the goods for their total value against loss from fire, theft, pilferage or other casualties;

4. To keep said goods or the proceeds therefrom whether in money or whatever form, Separate and capable of identification as property of the entruster;

5. To return the goods, documents or instruments in the event of non-sale or upon demand of the entruster; and

6. To observe all other terms and conditions of the trust receipt not contrary to the provisions of the Trust Receipts Law.

►If the entrustee were to return the goods to the entruster as he was not able to sell them, would the obligation secured by the trust receipt be extinguished? Is deficiency claim proper in a trust receipt transaction?

►NO. A trust receipt is a security agreement, pursuant to which a bank acquires a “security interest” in the goods. The initial repossession by the bank of the goods subject of the trust receipt did not result in the full satisfaction of the loan obligation. A claim for deficiency would thus be in order.

►If the entrustee were to cancel the trust receipt and take possession of the goods, would this amount to dacion en pago?

►Neither can repossession amount to dacion en_pago.

►Dation in payment takes place when property is alienated to the creditor in satisfaction of a debt in money and the same is governed by sales.

►Dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation.

►The repossession of the goods by the entrustee was merely to secure the payment of its obligation to the entrustor and not for the purpose of transferring ownership thereof in satisfaction of the obligation.

LETTERS OF CREDIT

►How does the independence principle apply to letters of credit?►The independence principle assures the seller or the beneficiary of prompt payment

independent of any breach of the main contract and precludes the issuing bank from determining whether the main contract is actually accomplished or not.

►Under this principle, banks assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or for the general and/or particular conditions stipulated in the documents or superimposed thereon, nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented by any documents, or for the good faith or acts and/or omissions, solvency, performance or standing of the consignor, the carriers, or the insurers of the goods, or any other person whomsoever.

►The independence principle thus liberates the issuing bank from the duty of ascertaining compliance by the parties in the main contract. The obligation under the letter of credit is independent of the related and originating contract

►What is a standby letter of credit? How does it differ from a commercial letter of credit?►There are three significant differences between commercial and standby credit. First, commercial credits involve the payment of money under a contract of sale. Such credits

become payable upon the presentation by the seller-beneficiary of documents that show he has taken affirmative steps to comply with the sales agreement.

In the standby type, the credit is payable upon certification of a party’s nonperformance of the agreement. The document that accompany the beneficiary’s draft tend to show that the applicant has not performed his obligation.

The beneficiary of a commercial credit must demonstrate by documents that he has performed his contract.

The beneficiary of the standby credit must certify that his obligor has not performed the contract.

►How does a letter of credit differ from a contract of guaranty?►The concept of guarantee vis à vis the concept of an irrevocable letter of credit are

inconsistent with each other. The guarantee theory destroys the independence of the bank’s responsibility from the contract

upon which it was opened and the nature of both contracts is mutually in conflict with each other. In contracts of guarantee, the guarantor’s obligation is merely collateral and it arises only upon

the default of the person primarily liable. On the other hand,In an irrevocable letter of credit, the bank undertakes a primary obligation.

►Moreover, a letter of credit is defined as an engagement by a bank or other person made at the request of a customer that the issuer shall drafts or other demands of payment upon compliance with the conditions specified in credit.

NEGOTIABLE_INSTRUMENTS

►Explain the SHELTER RULE►A holder who is not a holder in due course but derives his title through a holder in due

course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter.

►When the drawee bank pays a materially altered check, can it claim reimbursement from the drawer?

►When the drawee bank pays a materially altered check, it violates the terms of the check, as well as its duty to charge its client’s account only for bona fide disbursements he had made. Since the drawee bank did not pay according to the original tenor of the instrument, as directed by the drawer, then it has no right to claim reimbursement from the drawer, much less, the right to deduct the erroneous payment it made from the drawer’s account which it was expected to treat with utmost fidelity.

►Exception: when the drawer was the one who made or authorized the alteration or when he failed to exercise reasonable diligence to avoid it.

Distinguish between: contract of indorsement and guaranty.►A contract of indorsement is primarily that of transfer, while a contract of guaranty is that of

personal security. ►The liability of a guarantor/surety is broader than that of an indorser. ►Thus, unless the bill is promptly presented for payment at maturity and due notice of

dishonor given to the indorser within a reasonable time, he will be discharged from liability thereon. On the other hand, except where required by the provisions of the contract of suretyship, a demand or notice of default is not required to fix the surety’s liability. He cannot complain that the creditor has not notified him in the absence of special agreement to that effect in the contract o suretyship.

►Will discharge of the drawer’s liability due to lack of protest operate to discharge him from his letter of undertaking which he signed as additional security for the draft (bill of exchange)?

►The drawer can still be made liable under the letter of undertaking even if he is discharged due to failure to protest the non-acceptance of the drafts.

►It bears stressing that it is a separate contract from sight draft. ►The liability of the drawer under the letter of undertaking is direct and primary, independent

from his liability under the sight draft.►Liability subsists on it even if the sight draft was dishonored for non-acceptance or non

payment.

►Who is an accommodation party?►An accommodation party is who meets all the three requisites, viz: (1) he must be a party to the instrument, signing as maker, drawer, acceptor, or indorser; (2) he must not receive value therefor; and (3) he must sign for the purpose lending his name or credit to some person.

►The accommodation party is liable on the instrument to a holder for value though the holder, at the time of taking the instrument, knew him or her to be merely accommodation party, as if the contract was not for accommodation.

►The relation between accommodation party and the accommodated party is one of principal and_surety_–_the accommodation party being the surety.

►The accommodated party was allowed extension of payment without the consent of the accommodation party. Is the latter still liable?

►Since the liability of an accommodation party remains not only primary but also unconditional to a holder for value, even if the accommodated party receives an extension of the period for the payment without the consent of the accommodation party, the latter is still liable for the whole obligation and such extension does not release him because as far as the holder for value is concerned, he is a solidary co-debtor.

►A check, payable to the order of X and Y was deposited to a bank (collecting_bank) with the lone indorsement of X. X, subsequently withdrew the entire proceeds thereof. State theimplications.

►Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse unless the one indorsing has authority to indorse for the others.

►The payment of an instrument over a missing indorsement is the equivalent of payment on a forged indorsement or an unauthorized indorsement in itself in the case of joint payees.

►A collecting bank, where a check deposited and which indorses the check upon presentment with the drawee bank, is indorser. This is because in_indorsing a check to the drawee bank, a collecting bank stamps at the back of the check with the "all_prior endorsements and/or lack of endorsement guaranteed" and, for all intents and purposes, treats the check as a negotiable instrument, hence, assumes the warranty of an indorser.

►Without the collecting bank’s warranty, the drawee bank would not have paid the value of the subject check

►The collecting bank or last indorser, generally suffers the loss because it has the duty to ascertain the genuineness of all prior indorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of prior indorsements.

►Can the holder sue the drawee bank if the latter refuses payment of a check notwithstanding sufficiency of funds?

►NO. A check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts or certifies the check.

►Thus, if a bank refuses to pay a check, notwithstanding the sufficiency of funds, the payee-holder cannot sue the bank. The payee-holder should instead sue the drawer who might in turn sue the bank. There is no privity of contract exists between the drawee bank and the payee.

►Does the alteration on the serial number of the check constitute material alteration?

►The alterations on the serial numbers do not constitute material alteration within the contemplation of the Negotiable Instruments Law.

►An alteration is said to be material if it alters the effect of the instrument.►It means an unauthorized change in an instrument that purports to modify in any

respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party. In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the NIL.

►Distinguish between: inland and foreign bill of exchange.►An inland bill of exchange is a bill which is or on its face purports to be, both drawn and

payable within the Philippines. ►Thus, a foreign bill of exchange may be drawn outside the Philippines, payable outside the

Philippines, or both drawn and payable outside of the Philippines. ►Further, a foreign bill of exchange must be protested in case of dishonor to charge the drawer

and the indorsers while an inland bill of exchange need not be protested.

►What is a manager’s check?►A manager’s check is one drawn by the bank’s manager upon the bank itself.►It is similar to a cashier’s check both as to effect and use.►A cashier’s check is a check of the bank’s cashier on his own, or another’s check.►In effect, it is a bill of exchange drawn by the cashier of a bank upon the bank itself, and

accepted in advance by the act of its issuance.►It is really the bank’s own check and may be treated as a promissory note with the bank as a

maker.►The check becomes the primary obligation of the bank which issues it and constitutes its

written promise to pay upon demand. The mere issuance of it is considered an acceptance thereof.

►Discuss the effects of certifying a check.►The effects are:1) It is equivalent to acceptance and is the operative act that makes the bank liable;

2) It amounts to the assignment of the funds of the drawer in the hands of the drawee;3) If obtained by the holder, persons secondarily liable are discharged.

►Explain the meaning of check kiting.►It refers to the wrongful practice of taking advantage of the float, the time that elapses

between the deposit of the check in one bank and its collection at another. In anticipation of the dishonor of the check that was deposited, the original check will be replaced with another worthless check.

INSURANCE

►The_policy_reads: “The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company.” It would appear that at the time of loss, a loan has been contracted with the Assured but it is not clear whether the Insurer has approved the insurance application. When should the policy be deemed effective?

►While one provision appears to state that the insurance coverage of the clients of Assured already became effective upon contracting a loan with the Assured, another appears to require the Insurer to approve the insurance contract before the same can become effective.

►It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latter’s interest.

►Thus, the vague contractual provision must be construed in favor of the insured and in favor of the effectivity of the insurance contract.

►The seemingly conflicting provisions must be harmonized to mean that upon a party’s purchase of a memorial lot on installment from the Assured, an insurance contract covering the lot purchaser is created and the same is effective, valid, and binding until terminated by the Insurer by disapproving the insurance application.

►The second sentence is in the nature of a resolutory condition which would lead to the cessation of the insurance contract. Moreover, the mere inaction of the insurer on the insurance application must not work to prejudice the insured; it cannot be interpreted as a termination of the insurance contract. The termination of the insurance contract by the insurer must be explicit and unambiguous.

►Does the buyer have insurable interest over the goods even while the goods are still in transit?_

►YES. The buyer’s interest is based on the perfected contract of sale. The perfected contract of sale between him and the seller/shipper of the goods operates to vest in him an equitable title even before delivery or before he performed the conditions of the sale.

►The contract of shipment, whether under “F.O.B.”, “C.I.F.”, or “C& F” is immaterial in the determination of whether the buyer has insurable interest or not in the goods in transit.

►Distinguish between: Loss Payable Clause and Standard or Union Mortgage Clause

►Under a Loss Payable Clause, the mortgagee is made merely a beneficiary under the contract. Any default on the part of the mortgagor, which by the terms of the policy defeat his rights, will also defeat all rights of the mortgagee under the contract, even though the latter may not have been in any fault.

►On the other hand, a Standard or Union Mortgage Clause create collateral independent contracts between the insurer and the mortgagee and provide that the rights of the mortgagee shall not be defeated by the acts or defaults of the mortgagor.

►What is a Mortgage Redemption Insurance?_►A “Mortgage Redemption Insurance” is a group insurance policy of mortgagors which is

intended as a device for the protection of both the mortgagee and the mortgagor.►On the part of the mortgagee, it has to enter into such contract so that in the event of the

unexpected demise of the mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor in paying the obligation. In a similar vein, ample protection is given to the mortgagor such

that in the event of death, the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness.

►Where the mortgagor pays the insurance premium under the group insurance policy, the loss payable to the mortgagee, the insurance is on the mortgagor's interest, mortgagor continues to be party to the contract. In this type of policy insurance, mortgagee is simply an appointee of the insurance fund, such loss payable clause does not make the mortgagee a party to the contract.

►In a contract of insurance, how does subrogation take place?►Upon payment to the consignee of indemnity for the loss of or damage of the insured goods,

the insurer’s entitlement to subrogation pro tanto equips it with cause of action in case of a contractual breach or negligence. In the exercise of its subrogatory right, an insurer may proceed against an erring carrier. To all intents and purposes, the insurer stands in the place and in substitution of the consignee.

►State the exceptions to the subrogation rule.►There is no subrogation in the following cases:(1) When the insured, by his own act, releases the party at fault of his liability;(2) When the insurer pays the insured without notifying the one who has in good faith settled

the insured’s claim for loss;(3) When the insurer pays the insured for a loss excepted from the policy;(4) When life insurance is involved.

►In what cases is the designation of beneficiary in life insurance void due to disqualifications under the law?

►In the following cases, the designation of beneficiary is void:(a) Those made between persons who were guilty of adultery or concubinage at the time of

the donation;(b) Those made between persons found guilty of the same criminal offense, in consideration

thereof;(c) Those made to public officer or his wife, descendants and ascendants, by reason of his office.

(NOTE:_ The disqualification applies to life insurance and the insurance contract itself remains valid, designation of beneficiary is void.

►Under the policy, disabilities which existed before the commencement of the agreement are excluded if they become manifest within one year from effectivity. The insured allegedly prevented presentment by the insurer of the doctor who will testify on her medical condition because of the patient privilege. The insurer thus assumed that the testimony would be adverse and was willfully suppressed by the insured. Decide whether the insurer is liable

►It is an established rule in insurance contracts that when their terms contain limitations on liability, they should be construed strictly against the insurer. These are contracts of adhesion the terms of which must be interpreted and enforced stringently against the insurer which prepared the contract.

►In a third party liability insurance, could the insurer be sued directly by the victim? Could the insurer be made solidarily liable with the insured or the wrongdoer?

►The victim may proceed directly against the insurer for indemnity.►Insurance is intended to provide compensation for death or bodily injuries suffered by the

innocent third parties or passengers as a result of the negligent operation of motor vehicles.►The victims and their dependents are assured of immediate financial assistance,

regardless of the financial capacity of vehicle owners.

►Be that as it may, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held liable in solidum with the insured and/or the other parties found at fault.

►For the liability of the insurer is based on contract, and that of the insured carrier is based on tort.

►The third party liability of the insurer is only up to the extent of the insurance policy and that which is required by law; and it cannot be held solidarily liable for anything beyond that amount. Any award beyond the insurance coverage would already be the sole liability of the insured and/or the other parties at fault

►In what cases is the policy binding even if premium is unpaid?(1) When the grace period applies in case of life and industrial life policy;(2) When there is an acknowledgement in the policy of receipt of premium;(3)When there is an agreement that the premium shall be payable on installment;(4) When there is a credit extension; and(5)When the equitable doctrine of estoppels applies

►When is return of premium warranted?►Return of premium is warranted in the following cases:(1) The thing insured was not exposed to the period insured against;(2) Time policy is surrendered before the stipulated period lapses;(3) The contract is voidable due to fault or misrepresentation of the insurer or default

of the insured other than actual fraud;(4) Over insurance by several insurers

►What devices are used to prevent lapse of life insurance►To prevent lapse of life insurance policy, the following devices are used:(a) Grace period; (b) automatic policy loan; (c) application of dividend; and(d) restatement clause.

► What is an “All Risks” insurance policy?►An “All Risks” insurance policy covers all kinds of loss other than those due to willful and

fraudulent act of the insured.

►What is an industrial life insurance?►An industrial life insurance is one where the premiums are payable either monthly or oftener,

if the face amount of the insurance provided in any policy is not more than 500 times that of the current statutory minimum daily wage in the City of Manila, and if the words “industrial_policy” are printed upon the policy as part of the descriptive matter.

►What are cover notes? What are the limitations on the issuance of cover notes?

►Cover notes are interim or preparatory contracts of insurance. An interim coverage may be necessary because the insurer may need more time to process the insurance application. The issuance of cover notes is subject to the following:

(1) Issuance or renewal is upon approval of the Insurance Commission;(2) Duration is not more than 60 days from issuance;(3) Cancellation by either party is upon prior 7 day notice to the other;(4) Main policy to be issued within 60 days after cover note was issued;(5) Extension of 60 day coverage is subject to Insurance Commission’s approval.

►In reinsurance, when does the original insured have direct recourse against the reinsurer?

►The original insured may directly sue the reinsurer if the reinsurance policy clearly contains a stipulation pour autrui in his favor. Such stipulation, however, should not, in any way, affect or curtail, the original insured’s recourse to the original insurer and the latter’s recourse against the reinsurer.

►Explain the Inchmaree Clause in a marine insurance.►This is a clause included in a hull policy to cover loss or damage through the bursting of the

boiler, breaking of shafts or through latent defects of the machinery or equipment, hull or its appurtenances and faults or errors in navigation or management of the vessel.

►The clause should be expressly provided for because damage of this sorts are not included in the term “perils of the sea.”

►State the requisites of co-insurance in marine insurance.►Co-insurance in marine insurance is subject to the following requisites:(a) there must be partial loss; and(b) the insurance coverage is less than the value of the property insured.

►Explain the FPA Clause.►FPA or Free from Particular Average clause limits the liability of the insurer in case of partial

loss.

►What are the rules on claims under the “no fault indemnity” provision/

►Proof of fault or negligence is not necessary for payment of any claim for death or injury to a third party subject to the following:

(1) A claim may be made against one motor vehicle only;(2) If the victim is an occupant of a vehicle, his claim shall lie against the insurer of the vehicle

in which he is riding, mounting or dismounting from;(3) If the victim is not an occupant, the claim shall lie against the insurer of the directly

offending vehicle;(4) In any case, right to recover from the owner of the responsible vehicle shall remain;(5) Total indemnity in respect of any person shall not exceed P15,000.00;(6) Proofs of loss shall consist of:

(a) police report; (b) death certificate; and(c) medical report and evidence of medical or hospital disbursement

TRANPORTATION

►Is a travel agency a common carrier?►No. A travel agency is not an entity engaged in the business of transporting either passengers

or goods. Its covenant with its customers is simply to make travel arrangements in their behalf. Its services include procuring tickets and facilitating travel permits or visas as well as booking customers for tours.

►Explain the registered owner rule. What is the purpose of the rule?►Regardless of who the actual owner is of a motor vehicle might be, the registered owner is

the operator of the same with respect to the public and third persons, and as such, directly and primarily responsible for the consequences of its operation. In contemplation of law, the owner/operator of record is the employer of the driver, the actual operator and employer being considered merely as his agent.

►The main purpose of vehicle registration is the easy identification of the owner who can be held responsible for any accident, damage or injury caused by the vehicle. Easy identification prevents inconvenience and prejudice to a third party injured by one who is unknown or unidentified.

►If the registered owner was made liable to the victim, can he claim reimbursement from the actual owner/operator of the vehicle?►Yes. The registered owner has a right to be indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury caused to the victim.

►Who is a “ship agent”? Is his liability the same whether he acts as agent of the ship owner or the charterer?

►A ship agent is “the person entrusted with provisioning or representing the vessel in the port in which it may be found.” Hence, whether acting as agent of the owner of the vessel or as agent of the charterer, petitioner will be considered as the ship agent and may be held liable as such, as long as the latter is the one that provisions or represents the vessel

►Does extraordinary diligence require the carrier to vouch for the correctness of the entries made in the travel papers of a passenger?

►NO. It may be true that the carrier has the duty to inspect whether its passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of every entry in these documents. A carrier could not vouch for the authenticity of a passport and the correctness of the entries therein. The power to admit or not an alien into the country is a sovereign act, which cannot be interfered with even by the carrier.

►Does the owner of the vehicle being operated under the BOUNDARY SYSTEM remain liable as common carrier?

►YES. To exempt from liability the owner of a public vehicle who operates it under the “boundary system” on the ground that he is a mere lessor would be not only to abet flagrant violations of the Public Service Law, but also to place the riding public at the mercy of reckless and irresponsible drivers—reckless because the measure of their earnings depends largely upon the number of trips they make and, hence, the speed at which they drive; irresponsible because most if not all of them are in no position to pay the damages they might cause.

►The defendant’s main business is brokerage but it also offers carrying services. For liability purposes, may the defendant be sued as common carrier if the damage occurred in the performance of its carrying services?

►YES. The law does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only as an ancillary activity.

►Explain the doctrine of last clear chance. When does the doctrine apply?

►The doctrine states that where both parties are negligent but the negligent act of one is appreciably later than that of the other, or where it is impossible to determine whose fault or negligence caused the loss, the one who had the last clear opportunity to avoid the loss but failed to do so, is chargeable with the loss.

►The doctrine applies to a suit between the owners and drivers of two colliding vehicles.►It does not apply where a passenger demands responsibility from the carrier to enforce its

contractual obligations, for it would be inequitable to exempt the negligent driver/owner on the ground that the other driver was guilty of negligence.

►Explain the three fold character of a Bill of_Lading.►A bill of lading operates both as:(1) receipt (2) contract.

►It is a contract for the good shipped and a contract to transport and deliver the same as stipulated. It becomes effective upon delivery to and accepted by the shipper.(3) document_of_title._

►The consignee failed to file a formal notice of claim within 24 hours from receipt of the damaged merchandise as required under the Code of Commerce. Is the filing of a notice of claim a condition precedent to the accrual of a right of action against the carrier for the damages caused to the merchandise?

►The requirement to give notice of loss or damage to the goods is not an empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the shipment has been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is still fresh and easily investigated so as to safeguard itself from false and fraudulent claims.

►The 24 hour claim requirement has been construed as a condition precedent to the accrual of a right of action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and prove the fulfillment of the condition. Otherwise, no right of action against the carrier can accrue in favor of the former.

►What are the clauses that may be included in a Charter Party?1. Jason_Clause

►a provision which states that in case of maritime accident for which the ship owner is not responsible by law, contract or otherwise, the cargo shippers, consignees or owners shall contribute with the shipowner in general average

2. Clause_Paramount►a provision which states that COGSA shall apply, even though the transportation is

domestic, subject to the extent that if any term of the bill of lading is repugnant to the COGSA or applicable law, then to the extent thereof, the provision of the bill of lading is void

CORPORATION LAW

►Explain the CONCESSION THEORY►Under this theory, a corporation is a creature without any existence until it has

received the imprimatur of the state acting according to law.

►Distinguish between stock and non-stock corporation►A stock corporation is one whose capital stock is divided into shares and authorized

to distribute to the holders of such shares dividends. ►A non stock corporation is one where no part of its income is distributable as

dividends to its members, trustees or officers.

►What are essential for the existence of a de facto corporation?►The filing of articles of incorporation and the issuance of the certificate of incorporation are

essential for the existence of a de facto corporation. ►It has been held that an organization not registered with the Securities and Exchange

Commission cannot be considered a corporation in any concept, not even as a corporation de facto.

►What is a sole proprietorship? Does it enjoy separate personality?►A sole proprietorship is the oldest, simplest, and most prevalent form of business enterprise. It

is an unorganized business owned by one person. The sole proprietor is personally liable for all the debts and obligations of the business.

►A sole proprietorship does not possess a juridical personality separate and distinct from the personality of the owner of the enterprise. The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual and requires its proprietor or owner to secure licenses and permits, register its business name, and pay taxes to the national government.

►Explain briefly the DOCTRINE OF PIERCING THE VEIL OF CORPORATE ENTITY.

►A corporation will be looked upon as a legal entity as a general rule, and until sufficient reason to the contrary appears; but when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend a crime, the law will regard the corporation as an association of persons, or in case of two corporations, merge them into one.

►When should the DOCTRINE OF PIERCING be raised?►The issue of piercing the veil of corporate fiction should be raised before the trial court. The

issue cannot be treated for the first time on appeal.►To allow the petitioner to pursue such a defense would undermine basic considerations of due

process.

►Cite specific cases where the separate identity of the corporation could be pierced

1. When the veil of corporate fiction is made as a shield to perpetuate a fraud or confuse legitimate issues such as the relation of employer and employee;

2. When used as a shield for tax evasion;3. When used to shield violation of the prohibition against forum shopping;4. When the separate identity of the corporation is being utilized to violate intellectual property

rights of a third person

►Explain the INSTRUMENTALITY RULE►Where one corporation is so organized and controlled and its affairs are conducted so that it

is, in fact, a mere instrumentality or adjunct of the other, the fiction of the corporate entity of the ‘instrumentality’ may be disregarded.

►The control necessary to invoke the rule is not majority or even complete stock control but such domination of finances, policies and practices that the controlled corporation has, so to speak, no separate mind, will or existence of its own, and is but a conduit for its principal.

►It must be kept in mind that the control must be shown to have been exercised at the time the acts complained of took place.

►The control and breach of duty must proximately cause the injury or unjust loss for which the complaint is made.

Explain_briefly_the_DOCTRINE OF_RELATION.__Under_this_doctrine,_when_the_delay_in_effecting_or_filing_the_amended_articles_of_incorporation_for_the_extension_of_corporate_term_is_due_to_an_insuperable_interference_occurring_without_the_corporation’s_ intervention_ which_ could_ not_ have_ been_prevented_by_ prudence,_ diligence,_and_care,_the_same_will_be_treated_as_having_been_effected_before_the_expiration_of_the_original_term_of_the_corporation.__What_shares_could_be_deprived_of_voting_rights?__Section_of_the_Corporation_Code_explicitly_provides_that_“no_share_may_be_deprived_of_voting_rights_ except_ those_ classified_ and_ _ as_ “preferred”_ or_ “redeemable”_ shares,_ unless_otherwise_ provided_ in_ this_ Code”,_ and_ that_ “there_ shall_ always_ be_ a_ class_ or_ series_ of_ shares_which_have_complete_voting_rights._There_is_nothing_in_the_articles_of_incorporation_or_an_iota_of_evidence_ on_ record_ that_ shows_ that_ class_ “B”_ shares_ were_ categorized_ as_ either_preferred_or_redeemable_shares._ (CASTILLO,_ et._ al._ _ vs._ANGELES_BALINGHASAY,_et._ al.,_GR_ No._ 150976,_18October_2004)_Explain_the_DOCTRINE_OF_EQUALITY_OF_SHARES.___

Where_ the_ articles_of_ incorporation_do_ not_ provide_ any_distinction_of_ the_ shares_of_ stock,_ all_shares_issued_by_a_corporation_are_presumed__be_equal_and_entitled_to__same_rights_and_

privileges_and_subject_to_the_same_liabilities._Would_deposit_on_stock_subscription_make_a_person_a_stockholder___corporation?__The_deposit_on_stock_subscription_is_merely_an_amount_of_money_received_by_a_corporation_with_a_view_of_applying_the_same_as_payment_for_additional_issuance_of_shares_in_the_future,_an_eventwhich_may or_ may_ not_ happen._ The_ person making_ _ deposit_on_ stock_ subscription_ does_ _have_ the_ standing_of_ a_ stockholder_ and_ he_ is_ not_ _ to_ dividends,_ voting_ rights_or_ other_prerogatives_and_attributes_of_a_stockholder._(COMMISSIONER_OF_INTERNAL_REVENUE__FIRSTEXPRESS_PAWNSHOP_COMPANY,_INC.,_G.R._Nos._172045_46,_16_June_2009)__Which_should_prevail_in_the_determination_of_shareholders,_the_general_information_sheet_or_the_corporate_books?__The_ information_ in_ the_ General_ Information_ Sheet_ submitted_ to_ _ SEC_ will_ still_ have_ to_ be_correlated_ with_ the_ corporate_ books_ of_ the_ Company._ As_ between_ the_ General_ Information_Sheet_and_the_corporate_books,_it_is_the_latter_that_is_controlling._LAO_vs._LAO,_G.R._No._170585,

6_October_2008)_Could_any_stockholder,_at_ his_ pleasure,_ pull_out_ the_machines_and_equipment,_following_ the_sale_of_his_shares_to_a_third_party?__NO._The_property_of_a_corporation_is_not_the_property_of_its_stockholders_or_members._Under_the_ trust_ fund_ doctrine,_ the_ capital_ stock,_ property,_ and_ other_ assets_ of_ a_ corporation_ are_regarded_as_equity_in_trust_for_the_payment_of_corporate_creditors_which_are_preferred_over_thestockholders_ in_ the_ distribution_ of_ corporate_ assets._ The_ distribution_ of_ corporate_ assets_ and_property_cannot_be_made_to_depend_on_the_whims_and_caprices_of_the_stockholders,_officers,_or_directors_ of_ the_ corporation_ unless_ the_ indispensable_ conditions_ and_ procedures_ for_ theprotection_of_corporate_creditors_are_followed._(YAMAMOTO_vs._NISHINO_LEATHER_INDUSTRIES,G.R._No._150283,_16_April_2008)_State_ the_ requisites_ that must_ _ established for_ the_ legal_ existence_ of_ a_ subsidiary_ to_ be_

disregarded._

While_ a_ corporation_may_ _ _ subsidiary_ of_ another,_ it_ does_ not_ necessarily_ follow_ that_ its_corporate_ legal_ existence_ can_ just_ be_ disregarded._ _ _ subsidiary_ has_ an_ independent_ andseparate_juridical_personality,_distinct_from_that_of_its__company;_hence,_any_claim_or_suit_against_ the_ latter_ does_ not_ bind_ the_ former,_ and_ vice_ versa._ In_ applying_ the_ doctrine,_ the_following_ requisites_ must_ be_ established:_ (1)_ _ not_ merely_ majority_ or_ complete_ stockcontrol;_(__control_must_have_been_used__the_defendant_to_commit_fraud_or_wrong,_to_perpetuate_ the_ violation_ of_ a_ statutory_ _ other_ positive_ legal_ duty,_ or_ dishonest_ acts_ in_contravention_of_plaintiff’s_legal_rights;__3)_the_aforesaid_control_and_breach_of_duty_mustproximately_cause_the_injury_or_unjust__complained_of._(JARDINE_DAVIS,_Inc._vs._JRB_REALTY,_G.R._No._151438,_15_July_2005)___When_the_corporate_mask__removed,_is_the_corporate_character_thereby_abrogated?__NO._The_corporate_mask_may_be_removed_and_the_corporate_veil_pierced_when_a_corporation_the_ mere_ alter_ ego_ of_ another._ Where_ badges_ _ _ exist,_ where_ public_ convenience_ is_defeated,_ where_ a_ wrong_ is_ sought_ to_ be_ justified_ thereby,_ or_ where_ a_ separate_ corporateidentity_ is_ used_ to_ evade_ financial_ obligations_ _ employees_or_ to_ third_ parties,_ _ notion_of_separate_legal_entity_should_be_set_aside_and__factual_truth_upheld._When__happens,_the_corporate_character_is_not_necessarily_abrogated._It_continues_for_other_legitimate_objectives.__(PAMPLONA_ PLANTATION_ COMPANY,_ INC_ et_ al._ _ vs._ TINGHIL,_ et_ _ _ No._ 159121,_ 03_

February_2005)__Can_ a_ corporation_ provide_ limitations_ on_ the_ voting_ rights_ _ _ members_ of_ a_ non_stock_corporation?__YES._ Section_ 89_ of_ the_ Corporation_ Code_ pertaining_ to_ non_stock_ corporations_ provides_ that_"(t)he_right_of_the_members_of_any_class_or_classes_(of_a_non_stock_corporation)_to_vote_may_be_limited,_broadened_or_denied_to_the_extent specified in the articles of incorporation or the by_laws."_This_is_an_exception_to_Section_6_of_the_same_code_where_it_is_provided_that_"no_sharemay_be_deprived_of_voting_rights_except_those_classified_and_issued_as_preferred_or_redeemableshares,_unless_otherwise_provided_in_this_Code._Hence,_the_stipulation_in_the_By_Laws_providing_

for_ the_ election_ of_ the_ Board_ of_ Directors_ by_ districts_ is_ a_ form_ of_ limitation_ on_ the_ votingrights_of_the_members_of_a_non_stock_corporation_as_recognized_under_the_aforesaid_Section_89._Section_24_of_the_Code,_which_requires_the_presence_of_a_majority_of_the_members_entitledto_vote_in_the_election_of_the_board_of_directors,_applies_only_when_the_directors_are_elected_by_the_members_at_large,_such_as_is_always_the_case_in_stock_corporations_by virtue_of_Section_6._(LUIS_AO_AS,_et_al._vs._COURT_OF_APPEALS,_et_al.,_G.R._No._128464,_20_June_2006).___Explain_the_BUSINESS_JUDGMENT_RULE.__Questions_ of_ policy_ or_ of_ management_ are_ left_ solely_ to_ the_ honest_ decisions_ of_ officers_ and_directors_of_a_corporation,_and___as_they_act_in_good_faith,_their_orders_are_not_reviewableby_the_courts._(SABER_vs._COURT_OF_APPEALS,_G.R._No._132981,_August_31,_2004)__

In_what_instances_are_officers,_directors,_or_trustees_personally_liable_for_corporate_acts?_

The_instances__when_—_1._He_assents_(a)_to_a_patently_unlawful_act_of_the_corporation,_or_(b)_for_bad_faith__gross_negligence_in_directing_its_affairs,_or_(c)_for_conflict_of_interest,_resulting_indamages___corporation,_its_stockholders__other_persons;_2._He_consents_to_the_issuance_of_watered_stocks_or_who,_having_knowledge_thereof,_does_not_forthwith_file__the_corporate_secretary_ his_ written_ objection_ thereto;_ _He_ agrees_ to_ hold_ himself_ personally_and_ solidarily_liable_with_the_corporation;_or_4._He__made,_by_a_specific_provision_of_law,__personally_answer_for_his_corporate_action._(REPUBLIC_vs._INSTITUTE_FOR_SOCIAL_CONCERN,_FELIPE SUZARA_AND_RAMON_GARCIA,_G.R._NO._156306_January_28,_2005;_SOLIDBANK_CORPORATION_vs._MINDANAO_FERROALLOY_CORPORATION,__al.,_G.R._No._153535,_28_July___What_would_constitute_a_patently_unlawful_act_which_makes_a_director_personally_liable__the_obligations_of_the_corporation?__For_ a_ wrongdoing_ to_ make_ a_ director_ personally_ liable_ for_ debts_ of_ the_ corporation,_ the_wrongdoing_ approved_or_ assented_ to_ by_ the_ director_ must_be_ a_ patently_ unlawful_ act._ Mere_failure_to_comply_with_the_notice_requirement_of_labor_laws_on_company__or_dismissal_of_

employees_ does_ not_ amount_ to_ a_ patently_ unlawful_ act._ Patently_ unlawful_ acts_ are_ thosedeclared_unlawful by_law which_imposes_penalties_for_commission___unlawful_acts._There

must_be_a_law_declaring_the_act_unlawful_and_penalizing_the_actIn_this_case,_Article_283_of_the_Labor_Code,_requiring_a_one_month_prior_notice_to_employeesand_the_Department_of_Labor_and_Employment_before_any_permanent_closure_of_a_company,_does_not_state_that_non_compliance_with_the_notice_is_an_unlawful_act_punishable_under_the_Code. There is no provision in any other Article of the Labor Code declaring failure to give suchnotice_an_unlawful_act_and_providing_for_its_penalty.__(CARAG_vs._NATIONAL_LABOR_RELATIONS_

COMMISSION,_et_al.,_G.R._No._147590,_April_2,_2007)_Explain the_DOCTRINE_OF_APPARENT_AUTHORITY.__When_a_corporation_knowingly_permits_one_of_its_officers,_or_any_other_agent,_to_act_within_the_scope_of_an_apparent_authority,_it_holds_him_out_to_the_public_as_possessing_the_power_to_do_those_acts;_and_thus,_the_corporation_will,_as_against_anyone_who_has_in_good_faith_dealt_with_it_through_ such_ agent,_ be_ estopped_ from_ denying_ the_ agent’s_ authority._ (LAPU_LAPUFOUNDATION_vs._CA,_29_January_2004)__Is_teleconferencing_now_legally_permissible?___YES._ In_ this_ age_ of_ modern_ technology,_ the_ courts_ may_ take_ judicial_ notice_ that_ business_transactions_ may_ be_ made_ by_ individuals_ through_ teleconferencing._ _ In_ the_ Philippines,_teleconferencing_ and_ videoconferencing_ of_ members_ of_ board_ of_ directors_ of_ private_corporations_ is_ a_ reality,_ _ _ of_ Republic_ Act_ No._ 8792._ _ The_ Securities_ and_ Exchange_Commission_ issued_ SEC_Memorandum_Circular_ No._ 15,_ on_ November_30,_ 2001,_ providing_ the_guidelines_to_be_complied_with_related_to_such_conferences._EXPERTRAVEL_&_TOURS,_INC._vs.

CA,_et_al.,_G.R._No._152392,_26_May_2005)_In_case_the__could_not_be_filed_within__prescribed_period,_would_juridical_existence_automatically_cease?__NO._A_corporation_would_not_ipso_facto__its_powers_for_failure_to_file__required_by_laws._(LOYOLA_GRANVILLAS_HOMEOWNERS_ASSOCIATION_vs._CA,_276_SCRA_681)__the_very_least,_the_corporation_may_be_considered___facto_corporation_whose_right__exist_may_not_be_inquired_into_in_a_collateral_manner._(SAWADJAAN_vs._CA,_8_June_2005)_

_Explain_the_TRUST_FUND_DOCTRINE.__Under_this_doctrine,_the_capital_stock,_property_and__assets_of_a_corporation_are_regarded_as_equity_in_trust_for_the_payment_of_the_corporate_debts._Hence,_no_disposition__corporate_funds_to_the_prejudice_of_creditors_is_allowed.__Who_are_entitled_to_receive_dividends?___Dividends_ are_ payable_ to_ the_ stockholders_ of_ record_ as_ of_ the_ _ _ the_ declaration_ ofdividends_or_holders_of_record_on_a_certain_future_date,_as_the_case_may_be,_unless_the_parties_have_ agreed_ otherwise._ And_ a_ transfer_ of_ shares_ which_ is_ not_ recorded_ in_ the_ books_ of_ the_corporation_is_valid_only_as_between_the_parties,_hence,_the_transferor_has_the_right_to_dividendsas_against_the_corporation_without_notice_of_transfer_but_it_serves_as_trustee_of_the_real_owner_of_ the_ dividends,_ subject_ to_ the_ contract_between_the_ transferor_ and_ transferee_as_ to_who_is_

entitled_to_receive_the_dividends._(COJUANGCO_vs._SANDIGANBAYAN,_24_April_2009)_

Under_what_conditions_could_the_PCGG_vote_sequestered_shares?__It_is_settled_that_as_a_general_rule,_the_registered_owner_of_the_shares_of_a_corporation,_even_ifthey_ are_ sequestered_ by_ the_ government_ through_ the_ PCGG,_ exercises_ the_ right_ and_ theprivilege_of_voting_on_them._The_PCGG_as_a_mere_conservator_cannot,_as_a_rule,_exercise_acts_of_dominion_by_voting_these_shares.__The_registered_owner_of_sequestered_shares_may_only_be_deprived_of_these_voting_rights,_and_the_PCGG_authorized_to_exercise_the_same,_only_if_it_is_able_to_establish_that_(1)_there_is_prima_facie_evidence_showing_that_the_said_shares_are_ill_gotten_and_thus_belong_to_the_State;_and_(2)_there_is_an_imminent_danger_of_dissipation,_thus_necessitating_the_continued_sequestration_of_the_shares_and_authority_to_vote_thereupon_by_the_PCGG_while_the_main_issue_is_pending_before_the_Sandiganbayan._(TRANSMIDDLE_EAST_(PHILS.)_vs._SANDIGANBAYAN,_et_al.,_G.R._No._172556,_

09_June2006)___Is_the_issuance_of_a_certificate_of_merger_by_the_SEC_a_condition_precedent_to_the_transfer_of_shares_of_the_absorbed_corporation_to_the_surviving_corporation?__

A_merger_does__become_effective_upon_the_mere_agreement_of_the_constituent_corporations._As_ specifically_ provided_ under_ Section_ 79_ of_ _ Corporation_ Code,_ the_ merger_ shall_ only_ beeffective_ _ the_ issuance_ of_ a_ certificate_ of_ merger_ by_ the_ Securities_ and_ Exchange_Commission_(SEC),_ subject_ to_ its_prior_ determination_ that_ the_merger_is_ _ inconsistent_ with_the_Code_or_existing_laws._Where_a___the_merger_is_a_special_corporation_governed_by_its_own_ charter,_ the_ Code_ particularly_ mandates_ that_ a_ favorable_ recommendation_ of_ the_appropriate_ government_ agency_ should_ first_ be_ obtained._ The_ issuance_ of_ the_ certificate ofmerger_is_crucial_because_not__does_it_bear_out_SEC's_approval_but_also_marks_the_moment_whereupon_the_consequences_of_a_merger_take_place._By_operation_of_law,_upon_the_effectivityof_the_merger,_the_absorbed_corporation_ceases_to_exist___rights,_and_properties_as_well__liabilities_ shall_ be_ taken_ and_ deemed_ transferred_ to_ _ vested_ in_ the_ surviving_ corporation_(POLIAND_ INDUSTRIAL_ LTD._ vs._ NATIONAL_ DEVELOPMENT_ CO.,_ et_ al.,_ G.R._ Nos._ 143866_ &143877,_22_August__2005).__Determine_ whether_ the_ buyer_ at_ execution_ sale_ of_ shares_ will_ immediately_ acquire_ title

thereto._It_ should_ be_ restated_ that_ since_ there_ is_ no_ right_ to_ redeem_ personal_ property,_ the_ rights_ of_ownership_ are_ vested_ to_ the_ purchaser_ at_ the_ foreclosure_ (_ execution)_ sale_ and_ are_ notentangled_in_any_suspensive_condition_that_is_implicit_in_a_redemptive_period._xxx_There_is_novalid_ reason_ why_ the_ buyers_ at_ execution_ sale_ of_ petitioner’s_ shares_ of_ stock_ should_ be_prevented_from_obtaining_title_to_the_same._The_pendency_of_a case_involving_the_parties_does_not_ affect_ the_ registrability_ of_ the_ shares_ of_ stock_ bought_ at_ execution_ sale,_ although_ theregistration_is_without_prejudice_to_the_proceedings_to_determine_the_liability_of_the_parties_as_

against_each_other.__(LEE_vs._HON._TROCINO,_et_al.,_G.R._No._164648,_19_June_2009)_

Should_ dead_ members_ of_ a_ non_stock_ corporation_ be_ counted_ for_ quorum_ and_ voting_purposes?__In_a_non_stock_corporation,_membership_is_personal_and_non_transferable_unless_the_articles_of_incorporation_or_ by_laws_ states_ otherwise._ Section_ 91_ states_ that_ termination_ extinguishes_ all_

the_ rights_ of_ a_ member_ of_ the_ corporation,_ unless_ otherwise_ stated_ in_ the_ articles_ of_incorporation._Hence,_dead_members_are_not_to_be counted_in_determining_the_requisite_vote_in_corporate_matters_or_the_requisite_quorum_in_the_members’_meeting._(TAN_vs._SYCIP,_499_SCRA_216,_17_August_2006)_Are_the_requirements_for_termination__membership_in_a_non_stock_corporation_required_to_be_provided_in_the_Articles_of_Incorporation?_Section 91 of the Corporation Code provides:SEC._ 91._ Termination_ of_ membership.—Membership_ shall _ be_ terminated_ in_ the_manner_and_for _the_causes_provided_in_the_articles_of _incorporation_or_the_by_laws._Termination_ of _ membership_ shall_ have_ the_ effect_ of_ extinguishing_ all_ rights_ of_ a_member_ in _ the_ corporation_ or_ in_ its_ property,_ unless_ otherwise_ provided_ in_ the_articles_of _incorporation_or_the_by_laws._(Emphasis_supplied)_Clearly,_the_right_of_a_non_stock_corporation_to_expel_a_member_may_be_established_in the_by_laws_ alone._ It_ need_ not_ be_ provided_ _ _ the_ articles_ of_ incorporation._ VALLEY_ GOLF_ AND

COUNTRY_CLUB_vs._VDA._DE_CARAM,__No._158805,_16_April_2009)_

_What_are_the_conditions_for_the _penal_provision_under_Section_144 _of_the_Corporation_Code_toapply_in_case_of_violation_of _a _stockholder’s_right_to_inspect_the_corporate_books/records_asprovided_for_under_Section_74_of_the_Corporation_Code?_(1)_A_director,_trustee,_stockholder_or_member_has_made _a_prior_demand_in_writing_for_a_copy_of_excerpts_from_the_corporation’s_records_or_minutes;_(2)_ Any_ officer_or_ agent_ of_ the_ concerned_ corporation_ shall_ refuse_ to_ allow_ the _ said_ director,_trustee,_stockholder_or_member_of_the_corporation_to_examine_and_copy_said_excerpts;_(3)_ If_ such_ refusal_ is_ made_ pursuant_ to_ a_ resolution_ or_ order_ of_ the_ board_ of_ directors_ or_trustees,_the_liability_under_this_section_for_such_action_shall_be_imposed_upon_the_directors_or_trustees_who_voted_for_such_refusal;_and,_(4)_ Where_ the_ officer_ or_ agent_ of_ the_ corporation_ sets_ up_ the_ defense_ that_ the_ person_demanding_ to_ examine_ and_ copy_ excerpts_ from_ the_ corporation’s_ records_ and_ minutes_ has_improperly_ used_ any_ information_ secured_ through_ any_ prior_ examination_ of_ the_ records_ or_minutes_of_such_corporation_or_of_any_other_corporation,_or_was_not_acting_in_good_faith_or_for_a

legitimate_purpose_in_making_his_demand,_the_contrary_must_be_shown or_proved._(ANG_ABAYA_

vs._ANG,_G.R._No._178511,_4_December_2008)_What_are_the_requisites_for_filing_a_derivative_suit?___The_requisites_for_filing_a_derivative_suit_are_as_follows:__a)_ The_ party_ bringing_ suit_ should_ be_ a_ shareholder_ as_ of_ the_ time_ of_ the_ act_ or_ transaction_complained_of,_the_number_of_his_shares_not_being_material;_b)_The_party_has_tried_to_exhaust_intra_corporate_remedies,_i.e.,_he_has_made_a_demand_on_the_board_of_directors_for_the_appropriate_relief_but_the_latter_has_failed_or_refused_to_heed_his_plea;__c)__The_cause_of_action_ actually_devolves__the_corporation,_the_wrongdoing_or_harm_having_been,_or_being_caused_to_the_corporation_and_not_to_the_particular_stockholder_bringing_the_suit._(FILIPINAS_PORT_SERVICES,_INC.,__al._vs._Go,_et_al.,_G.R._No._161886,_March_16,_2007);__d)__No_appraisal_rights_are_available_for_the_act/s_complained_of;_and_e)_The_suit_is_not_a_nuisance__harassment_suit_(Sec.1,_Rule_8,_Interim_Rules_of_Procedure_for_Intra_Corporate_Controversies)__

When_is_exhaustion___corporate_remedies_excused___requirement_for_derivate_suit?_

While_it_is_true___complaining_stockholder__satisfactorily_show_that_he_has_exhausted_all_means_to_redress_his_grievances_within_the_corporation;_such_remedy_is_no_longer_necessary_where_the_corporation_itself_is_under_the_complete_control_of_the_person_against_whom_the_suitis_ being_ filed._ The_ reason_ is_ obvious:_ a_ demand_ upon_ the_ board_ to_ institute_ an_ action_ and_prosecute_ the_same_effectively_ would_ _ been_ useless_ and_an_ exercise_ _ futility._ (HI_YIELD_REALTY,_INC._vs._COURT_OF_APPEALS,__No._168863,_23_June_2009)__though,_that_in_YU,_et_ al._ vs._ YUKAYGUAN,_ et_ al.,_ _ No._ 177549,_ 18_ June_ 2009,_ the_ Supreme_ Court_ held_ that_exhaustion_ of_ intra_corporate_ remedies_ cannot_ be_ dispensed_ _ even_ if_ the_ company_ is_ a_family_ corporation._ There_ _ nothing_ in_ the_ pertinent_ laws_ _ _ supporting_ the_ distinction_between,_and_the_difference_in_the_requirements_for,_family_corporations_vis_à_vis_other_types_of_corporations,_in_the_institution_by_a_stockholder_of_a_derivative_suit.___In_ an_ Agreement,_ the_ foreign_ company’s_ activities_ _ the_ Philippines_ were_ confined_ to:_ (1)_maintaining_a_stock_of_goods_solely_for_the__of_having_the_same_processed__another

company;_and_(2)_consignment_of_equipment_with_such company_to_be_used___processing_of_products_for_export._Do_these_acts_amount_to_“doing_business”_in_the_Philippines?__NO._ _ By_ and_ large,_ to_ constitute_ “doing_ business”,_ the_ activity_ _ _ undertaken_ in_ the_Philippines_ is_ one_ that_ is_ for_ profit_making._ Under_ Section_ 1_ of_ _ Implementing_ Rules_ and_Regulations_ of_ the_ Foreign_ Investment_ Act,_ the_ foregoing_ activities_ do_ not_ constitute_ doing_business._(AGILENT_TECHNOLOGIES_SINGAPORE_(PTE)_LTD._vs._INTEGRATED_SILICON,_GR_154618,_

14_April_2004)_Would_ participation_ in_ a_ bidding_ for_ the_ development_ and_ operation_ of_ a_ modern_ marine_container_ terminal_ constitute_ doing_ business_ in_ the_ Philippines_ for_which_ a_ license_ must_ be_secured?__Participating_in_the_bidding_process_constitutes_“doing_business”_because_it_shows_the_foreign_corporation’s_intention_to_engage_in_business_here._The_bidding_for_the_concession_contract_is_but_ an_ exercise_ of_ the_ corporation’s_ reason_ for_ its_ existence._ xxx_ it_ is_ the_ performance_ by_ a_foreign_corporation_of_the_acts_for_which_it_was_created,_regardless_of_the_volume_of_business,_that_ determines_ whether_ a_ foreign_ corporation_ needs_ a_ license_ or_ not._ (HUTCHISON_ PORTS_PHILIPPINES_ LIMITED_ vs._ SBMA,_ GR_ 131367,_ 31_ August_ 2000;_ EUROPEAN_ RESOURCES_ ANDTECHNOLOGIES,_ INC,_ et_ al._ _ vs._ INGENIEUBURO_ BIRKHAHN,_ et_ al.,_ G.R._ No._ 159586,_ 26_ _ July2004)_Petitioner_ is_ engaged_ in_ the_ importation_ and_ exportation_ of_ lace_ products._ _ On_ several_occasions,_ respondent_ purchased_ lace_ products_ from_ the_ petitioner_ with_ the_ instruction_ todeliver_the_purchased___a_Hong_Kong_based_company.__Upon_receipt_of_the_goods_inHong_Kong,_the_products_were_considered_sold.__The__Kong_based_company,_in_turn,_had_the_ obligation_ to_ deliver_ the_ lace_ products_ to_ the_ Philippines._ _ Determine_ whether_ the_

petitioner_is_doing_business_in_the_Philippines._It_ is_ not_ doing_ business_ in_ the_ Philippines._ _ be_ doing_ or_ “transacting_ business_ in_ the_Philippines”,_the_foreign_corporation_must_actually_transact_business_in_the_Philippines,_that_is,_perform_specific_business_transactions__the_Philippine_territory_on__continuing_basis_in_its_own_ name_ and_ for_ its_ own_ account.Actual_ transaction_ of_ business_ within_ the_ Philippine_

territory_ is_ an_ essential_ requisite_ _ the_ Philippines_ to_ acquire jurisdiction over a foreigncorporation_and_thus_require__foreign_corporation_to_secure__Philippine_business_license.__If_a_ foreign_ corporation_ does_ _ transact_ such_ kind_ of_ business_ _ the_ Philippines,_ even_ if_ it_exports_ its_ products_ to_ the_ Philippines,_ the_ Philippines_ _ no_ jurisdiction_ to_ require_ suchforeign_corporation_to_secure_a_Philippine_business_license.__VAN_ZUIDEN_BROS._LTD._vs.__MANUFACTURING_INDUSTRIES,_INC.,_G.R._No._147905,__28,_2007)__Does_ the_ engagement_ of_ a_ Filipino_ national_ _ _ a_ foreign_ company’s_ premixed_ concreteoperations_in_the_Philippines_amount_to_“doing_business”?__YES._The_act_of_negotiating_to_employ_a_Filipino_national_to_run_a_foreign_company’s_pre_mixed_concrete_ operations_ in_ the_ Philippines_ are_managerial_ and_ operational_ acts_ in_ directing_ and_establishing_ commercial_ operations_ in_ the_ Philippines._ These_ are_ _ mere_ acts_ of_ a_ passive

investor._(PIONEER_INTERNATIONAL_vs._HON._GUADIZ,_G.R._No._156848,_11_October_2007)

What_are_the_general_tests_to_determine_whether_a_foreign_corporation_is_doing_business_in_the_Philippines?__Substance_ Test_ –_ whether_ the_ foreign_ corporation_ is_ continuing_ the_ body_ of_ the_ business orenterprise_for_which_it_was_organized_or_whether_it_has_substantially_retired_from_it_and_turned_it_over_to_another.__Continuity_ Test_–_ continuity_of_commercial_dealings_and_arrangements,_and_contemplates,_ tothat_extent,_the_performance_of_acts_or_works_or_the_exercise_of_some_of_the_functions_normally_incident_ to,_and_in_ the_ progressive_ prosecution_ of,_ the_purpose_and_object_of_ its_ organization(AGILENT_TECHNOLOGIES_SINGAPORE__LTD._vs_INTEGRATED_SILICON,_GR_154618,_14_April2004)_Do_ the_ powers_of_ a_ foreign_ corporation’s_ resident_ agent_ include_ the_ authority_ to_ execute_a_certification_against_forumshopping_on_behalf_of_its_principal?__NO._This_is_because___resident_agent_may_be_aware__actions_filed_against_his_principal_(aforeign_ corporation_ doing_ business_ in_ the_ Philippines,_ being_ the_ one_ authorized_ to_ receiveservices_ and_ other_ legal_ processes_on_ its_ behalf),_ _ resident_may_ not_ be_ aware_ of_ actions

initiated_by__principal,_whether_in_the_Philippines_against_a_domestic_corporation_or_privateindividual,__ _ the_ country_ where_ such_ corporation_ was_ organized_and_ registered,_ against_ a_Philippine_registered_corporation_or_a_Filipino_citizen.__(EXPERTRAVEL_&_TOURS,_INC._vs._COURT_OF_APPEALS_and_KOREAN_AIRLINES,_G.__152392,_26_May_2005)__

Where_the_insured_(a_foreign_corporation_doing_business_without_license

Where_the_insured_(a_foreign_corporation_doing_business_without_license)_is_incapacitated_to_sue_before_the_Philippine_courts,_would_it_follow_that_its_insurer,__exercising_its_subrogation_rights,_would_also_suffer_from_such_incapacity?__NO._Rights_inherited_by_a_subrogee_pertain_only_to_the_obligations_not_to_capacity._Incapacity__the_insured_will_not_affect_the_capacity_of_the_insurer_exercising_its_right_of_subrogation_because_capacity_ is_ personal_ to_ its_ holder._ It_ is_ conferred_ _ law_ and_ not_ by_ the_ parties._ LORENZO_SHIPPING_vs._CHUBB_&_SONS,_8_June_2004)___Would_ a_ pending_ intra_corporate_ case_ against_ an_ officer_ preclude_ the_ _ of_ a_ criminal_action_against_the_said_officer?__The_ filing_ of_ the_ civil/intra_corporate_ case_ before_ the_ SEC_ (now_ _ does_ not_ preclude_ the_simultaneous_and_concomitant_filing_of_a_criminal_action_before__regular_courts;_such_that,_a_fraudulent_ act_may_ give_ rise_ to_ liability_ for_ violation_ of_ the_ _ and_ regulations_ of_ the_ SEC_cognizable_by_the_SEC_itself,_as_well_as_criminal_liability_for_violation_of_the_Revised_Penal_Code_cognizable_by_ the_ regular_ courts,_ both_ charges_ to_ be_ filed_ and_proceeded_independently,_and

may_be_simultaneously_with_the_other.A_ dispute_ involving_ the_ corporation_ and_ its_ stockholders_ is_ not_ necessarily_ an_ intra_corporate_dispute_ cognizable_ only_ by_ the_ Securities_ and_ Exchange_ Commission._ _ Nor_ does_ it ipso_ factonegate_the_jurisdiction_of_the_Regional_Trial_Court_over_the_subject_cases._It_should_be_obvious_that_not_every_conflict_between_a_corporation_and_its_stockholders_involves_corporate_matters_that_only_the_SEC_can_resolve_in_the_exercise_of_its_adjudicatory_or_quasi_judicial_powers.”_The_better_policy_in_determining_which_body_has_jurisdiction_over_a_case_would_be_to_consider_not_only_the_relationship_of_the_parties_but_also_the_nature_of_the_questions_raised_in_the_subject_of_

the_ controversy._ (PEOPLE_ vs._FERNANDEZ_and_HAJIME_UMEZAWA,_GR_ No._ 149403,_04_ March__2005)__State_the_requisites_for_the_creation_of_management_committee.__The_requisites_for_the_creation_of__management_committee,_to_wit:_(1)_an_imminent_danger_ofdissipation,_ loss,_ wastage_ _ destruction_ of_ assets_ or_ other_ properties_ of_ respondent_corporation;_and_(2)_paralysis___business_operations_which_may_be_prejudicial_to_the_interest_of_the_parties_litigants,_petitioners,_or_the_general_public.___In_the_case_at_bar,__records_show_that_there_has_been__slack_in_the_business_operations_of_the_ corporation._ Further,_ mere_ possibility_ without_ proof_ of_ abusing_ corporate_ positions_ and_dissipation_ _ assets_ and_ properties_ of_ the_ corporation_ is_ not_ a_ valid_ ground_ for_ theappointment__a_management_committee/receiver._(SY_CHIM_vs._SY_SIY_HO,_G.R._No._164958,

27_January_2006)_Explain_the_SERIOUS_SITUATION_TEST.__In_appointing_a_receiver,_the__should_consider_whether_the_company’s_financial_situation_is_serious_and_whether_there___clear_and_imminent_danger_that__will_lose_its_corporate_assets_if_a_receiver_is_not_appointed._(PRYCE_CORPORATION_vs._COURT__APPEALS,_G.R._No._172302,__February_2008)__Does_the_misconduct_of_directors_or_officers_justify__appointment_of_a_receiver?__Misconduct_of_ corporate_ directors_or_ other_ officers_ is_ not_a_ ground_ for_ the_appointment_of_ a_receiver_where_there_are_one_or_more_adequate_legal_action_against_the_officers,_where_they_are_solvent,_ or_ other_ remedies._ The_ appointment_ of_ a_ receiver_ for_ a_ going_ corporation_ is_ a_ lastresort_ remedy,_ and_ should_ not_ be_ employed_ when_ another_ remedy_ _ available._ Relief_ by_receivership_is_an_extraordinary_remedy_and_is_never_exercised_if__is_an_adequate_remedy_at_law_or_if_the_harm_can_be_prevented_by_an_injunction_or_a_restraining_order._Bad_judgment_by_directors,_or_even_unauthorized_use_and_misapplication_of_the_company’s_funds,_will_not_justify_the_appointment_of_a_receiver_for_the_corporation_if_appropriate_relief_can_otherwise_be_had._

(AO_AS_vs._CA,_G.R._No._128464,_20_June_2006)_

Discuss_the_effect/s_of_the__creation_of_a_management_committee.__The_ appointment_ will_ result_ in_ suspension_of_ all_ actions_ against_ the_ corporation,_ the_ avowed_objective_ of_ which_ is_ to_ enable_ such_ management_ committee_ or_ rehabilitation_ receiver_ to_effectively_ exercise_ its_ powers_ free_ from_ any_ judicial_ or_ extra_judicial_ interference_ that_ might_unduly_ hinder_ or_ prevent_ the_ rescue_ of_ the_ distressed_ company._(TYSON’S_ SUPER_ CONCRETE,_INC.,_et_al._vs._COURT_OF_APPEALS,_et_al.,_G.R._No._140081,_23_June_2005)__Are_ labor_ claims_ likewise_ suspended_ upon_ the_ creation_ of_ a_ management_ committee_ or_appointment_of_a_receiver?__The_ law_ is_ clear:_ upon_ the_ creation_ _ _ management_ committee_ or_ the_ appointment_ of_ arehabilitation_receiver,_all_claims__actions_“shall_be_suspended_accordingly.”_No_exception_in_favor_of_labor_claims_is_mentioned__the_law._(LINGKOD_MANGGAGAWA_SA_RUBBERWORLD,_etal._VS._RUBBERWORLD_(PHILS.)_INC.,_et_al.,_G.R._NO._153882,_JANUARY_29,_2007)__

Are_actions_suspended_regardless_of_the_stage_of_proceedings?_

The_suspension___actions_for_claims_against_the_corporation_embraces_all_phases_of_the_suit,be_it_before__trial_court_or_any_tribunal_or__this_Court._No_other_action_may_be_taken,_including_ _ rendition_ of_ judgment_ during_ _ state_ of_ suspension._ It_ must_ be_ stressed_ that_what_ are_ automatically_ stayed_ or_ suspended_ are_ the_ proceedings_ of_ a_ suit_ and_ not_ just_ the_payment_of_claims_during_the_execution_stage_after_the_case_had_become__and_executory._(GARCIA,_ET_AL._VS._PHILIPPINE_AIRLINES,_INC.,_G.R._No._164856,_August__2007)__Are_ non_pecuniary_ claims_ _ stayed_ with_ the_ creation_ of_ _ management_ committee_ orappointment_of_a_receiver?_When_ a_ corporation_ is_ taken_ over_ by_ a_ rehabilitation_ receiver,_ all_ creditors_ stand_ on_ _footing,_not_anyone_should_be_given_preference_by__ahead_of_other_creditors._All_claims_whether_ pecuniary_ or_ not._ The_ Interim_ Rules_ _ Corporate_ Rehabilitation_ define_ _ claim_ as_referring_ to_ all_ claims,_ demands_ of_ whatever_ nature_ or_ character_ against_ the_ debtor_ or_ its_

properties,_whether_for_money_or_otherwise.__definition_is_so_encompassing,_there_are_no_distinctions_or_exemptions._(SOBREJUANITE_vs._ASB,_G.R._No._165675,_30_September_2005)__

Is_enforcement_of_maritime_lien_also_affected_by_the_suspension_order?_

_PD_ 902_A_ mandates_ that_ upon_ appointment_ of_ a_ management_ committee,_ rehabilitationreceiver,_board_or_body,_all_actions_for_claims_against_corporations,_partnerships_or_associationsunder_management_or_receivership_pending_before_any_court,_tribunal,_board_or_body_shall_besuspended._ PD_ 902_A_ does_ not_ make_ any_ distinction_ as_ to_ what_ claims_ are_ covered_ by_ thesuspension_ of_ actions_ for_ claims_ against_ corporations_ under_ rehabilitation._ No_ exception_ ismade_therein_in_favor_of_maritime_claims._Thus,_since_the_law_does_not_make_any_exemptions_or_

distinctions,_neither_should_we._Ubi_lex_non_distinguit_nec_nos_distinguere_debemos._

The_ issuance_ of_ the_ stay_ order_ by_ the_ rehabilitation_ court_ does_ not_ impair_ or_ in_ any_ waydiminish_a_creditor’s_preferred_ status._ The_enforcement_of_ its_ claim_ through_ court_ action_wasmerely_ suspended_ to_ give_ way_ to_ the_ speedy_ and_ effective_ rehabilitation_ of_ the_ distressed_shipping_company._Upon_termination_of_ the_ rehabilitation_ proceedings_or_ in_ the_ event_ of_ thebankruptcy_ and_ consequent_ dissolution_ of_ the_ company,_ the_ creditor_ can_ still_ enforce_ its_preferred_ claim_ upon_ the_ company._ (NEGROS_ NAVIGATION_ vs._ COURT_ OF_ APPEALS,_ 10_December_2008)__Does_a_petition_for_rehabilitation_require__filing_of_petition_for_suspension_of_payment?_A_corporation_may_have_considerable_assets_but_if_it_foresees_the_impossibility_of_meeting_its_obligations_for_more_than_one_year,__is_considered_as_technically_insolvent._Thus,_at_the_first_instance,_a_corporation_may_file__petition_for_rehabilitation—a_remedy_provided_under_Sec._4_1_of_the_Rules_of_Procedure__Corporate_Recovery.___When_Sec._4_1_mentioned_technical_insolvency_under_Sec._it_was_referring_to_the_definition_of_technical_insolvency__the_said_section;_it_was_not_requiring,_therefore,_a_previous_filing_of_apetition_for_suspension_of_payments.__(PNB_vs._COURT__APPEALS,_G.R._No._165571,_20_January_2009)__

Does_the_approval_of_the_Rehabilitation__violate_the_creditors’_right___impairment_of

contracts?__Section_6_[c]_of_P.D._No._902_A__that_"upon_appointment___management_committee,rehabilitation_ receiver,_ board_ _ body,_ pursuant_ to_ this_ Decree,_ _ actions_ for_ claims_ against_corporations,_partnerships__associations_under_management__receivership_pending_before_any_court,_tribunal,_board_or_body_shall_be_suspended."__The_approval_of_the_Rehabilitation_Plan_and_the_appointment_of_a_rehabilitation_receiver_suspend_ the_ actions_ for_ claims_ against_ respondent_ corporations._A_ creditor’s_ preferred_ status_over_the_unsecured_creditors_relative_to_the__liens_is_retained,_but_the_enforcement_ofsuch_ preference_ is_suspended._Considering_ enforcement_of_ loan_ (including_preference)_ ismerely_ suspended,_ there_ is_ no_impairment_of_ contracts,_ specifically_ its_ lien_ _ the_ mortgaged_properties._(ibid)___Decide_whether_receivership_will_excuse_the_Company_from_complying_with_the_reinstatementorder_of_the_Labor_Arbiter._Case_law_recognizes_that_unless_there_is_a_restraining_order,_the_implementation_of_the_order_ofreinstatement_ is_ ministerial_ and_ mandatory._ This_ injunction_ or_ suspension_ of_ claims_ by_legislative_fiat_partakes_of_the_nature_of_a_restraining_order_that_constitutes_a_legal_justification_for_ respondent’s_ non_compliance_ with_ the_ reinstatement_ order._ The_ Company’s_ failure_ to_exercise_the_alternative_options_of_actual_reinstatement_and_payroll_reinstatement_is_therefore_justified._Such_being_the_case,_the_Company’s_obligation_to_pay_the_salaries_pending_appeal,_as_the_normal_effect_of_the_non_exercise_of_the_options,_did_not_attach.__While_ reinstatement_ pending_ appeal_ aims_ to_ avert_ the_ continuing_ threat_ or_ danger_ to_ the_survival_or_even_the_life_of_the_dismissed_employee_and_his_family,_it_does_not_contemplate_the_period_when_the_employer_corporation_itself_is_similarly_in_a_judicially_monitored_state_of_being_resuscitated_ in_ order_ to_ survive._ (GARCIA_ vs._ PHILIPPINE_ AIRLINES,_ INC.,_ G.R._ No._ 164856,_ 20_January_2009)__Does_the_SEC_have_jurisdiction_over_the_liquidation_of_a_dissolved_corporation?_SEC’s_ jurisdiction_ does_ not_ extend_ to_ the_ liquidation_ of_ a_ corporation._ _ While_ the_ SEC_ hasjurisdiction_ to_ order_ the_ dissolution_ of_ a_ corporation,_ jurisdiction_ over_ the_ liquidation_ of_ the_corporation_now_pertains_to__appropriate_regional_trial_courts.__This_is_the_correct_procedure_

because_the_liquidation___corporation_requires_the_settlement_of_claims_for_and_against_thecorporation,_which__falls_under_the_jurisdiction_of__regular_courts._(CONSUELO_METAL_

CORPORATION_vs._PLANTERS_DEVELOPMENT_BANK,_G._No._152580,_26_June_2008)_

Does_ the_ _ have_ the_ power_ to_ collect_ _ for_ examining_ and_ filing_ of_ articles_ of_incorporation_and_by_laws?_The_authority_of_the_SEC_to_collect_and receive_fees_as_authorized_by_law___in_question._Its_power_ to_ collect_ fees_ for_ examining_ _ filing_ articles_ of_ incorporation_ and_ by_laws_ and_amendments_thereto,_certificates__increase_or_decrease_of_the_capital_stock,_among_others,_is_recognized._Likewise_established__its_power_under_Sec._7_of_P.__902_A_to_recommend_to_the_ President_ the_ revision,_ alteration,_ amendment_ or_ adjustment_ of_ the_ charges_ which_ it_ is

authorized_to_collect._(SEC_vs._GMA_NETWORK,_INC.,_G.R.__164026,_23_December_2008)